Kiosks lift video business

Revenue, led by Redbox, grew 94% in 2009

The video business found nearly $1 billion in new revenue sources in 2009 thanks to DVD kiosk operators such as the embattled Redbox.

U.S. consumer spending on DVD and Blu-ray rentals rose 4.1% to $6.5 billion in 2009, according to Rentrak’s Home Video Essentials, which collects point-of-sale data. During the year, kiosk revenue grew 94%, with the Redbox-dominated channel approaching $1 billion in revenue. Kiosk rentals were more than enough to offset a 3.2% decline in rentals from brick-and-mortar outlets such as Blockbuster and online sectors.

Consumer sales of DVD and Blu-ray, in comparison, fell 13.7% to $12.2 billion, Rentrak estimates. Rental growth did slow in the fourth quarter, however, when kiosks posted growth of 58% over the year-earlier period, not enough to counter a 12.5% fall in online and physical stores combined, and the overall rental market declined by 5%. Rentrak VP Brad Hackley attributed the late-year downturn to closures of physical stores by both Blockbuster and Hollywood/Movie Gallery. In-stores rental fees are higher — normally $3-$5 — than those through online services and kiosks.

Redbox is the leading kiosk operator in the U.S., with more than 20,000 automated kiosks nationwide. Its controversial $1-per-night model is supported by major studios representing about 40% of the rental market. Sony Pictures Home Entertainment, Paramount Home Entertainment, Lionsgate and Walt Disney Studios Home Entertainment all distribute movies directly to Redbox on street date.

Universal Studios Home Entertainment, 20th Century Fox Home Entertainment and Warner Home Video — which together account for another 40% of the market — impose a window of at least 28 days before their new releases are available directly to Redbox, and Redbox is suing each of the three on antitrust grounds.

The Blu-ray high-def disc format grew 48% in rental revenue during the year, Rentrak said, and accounted for 10% of packaged home entertainment purchases.